From a Master: The Art of Deal Making and Creating Value

This article is part of a series called Classified, in which we spotlight some of the more powerful lessons faculty are teaching in Haas classrooms.

Peter Goodson entered Cheit 110 on a recent drizzly Wednesday morning, ready to teach students the good, the bad, and the ugly of how mergers and acquisitions really get done. More importantly, he offered lessons in creating value, instead of destroying it, as many deals do.

“Any fool with money can buy a business,” says Goodson, a mergers & acquisitions veteran and Berkeley-Haas finance lecturer for over a decade. “This course is more about enhancing strategy and executing operational improvements to create value than teaching lessons in how to squander your own capital.”

The two topics that day included “Takeover Tussle,” which involved a hypothetical hostile bid by Oracle for Salesforce, and a case on buyer due diligence, which forced students to dig behind the scenes, questioning former disgruntled employees to find the truth about a seller.

The takeover scene is a meeting of Oracle directors, with some students taking on the role of company advisers presenting their case to the board. The rest of the class acted as directors. The first student to address the fictitious board didn’t get very far into his presentation before Goodson jumped in with a critique.

“Never go into a board meeting where you don’t intelligently compliment your audience in some way at the opening,” he said. “Realize that you have already met each director and have the total vote count in your pocket. Don’t read the (PowerPoint) slides. Synthesize what is important to the decision at hand. You must kindle an interchange with the audience that forces you to think on your feet.”

One presenter after another was challenged. “You’re role-playing as the board of directors— you don’t raise your hand. It’s demeaning,” Goodson insisted when the opportunity came to ask audience questions. Get to your point faster, he urged another student. “Insightful economy of words matters in leadership.”

Goodson’s bona fides run deep. He founded the M&A group at Kidder, Peabody at age 26 and later negotiated the investment bank’s $600 million sale to General Electric. Goodson’s perspective is shaped from his experience as lead advisor to hundreds of big M&A deals, but also as an owner/acquirer of many companies.  He was an early-stage partner at the influential private equity firm Clayton, Dubilier & Rice, which acquired more than 65 companies valued at a combined $100 billion over 40 years. The firm is most noted for value creation, with famous CEO partners including GE’s Jack Welch.

Goodson, now retired, teaches an elective M&A value creation course for Full-Time MBA’s and Evening & Weekend MBAs and a summer block turnaround leadership course for EWMBA and EMBA students aimed to show aspiring management consultants, investment bankers, top executive candidates, and CEOs the art of “change agency.”

He also co-teaches a course in private equity centered on investing, ownership, and value creation.

An insider’s approach

Few students show up to Goodson’s classes short on caffeine. Nor do they arrive expecting to dissect spreadsheets or textbook theories.

They come instead to get a glimpse of the real world—no matter how uncomfortable the view or how challenging the required deliverable may be. “Peter’s not one for a lot of unnecessary fluff,” says Aleksey Lakhchakov, MBA 16, and the class graduate school instructor. “He tells it like it is.”

This approach is just one reason why Goodson is so highly valued by Berkeley-Haas and its students, who have awarded him the Cheit Outstanding Teaching award multiple times. “There’s this idea that most business classes are management by spreadsheets,” says Travis Dziubla, MBA 16. “Peter’s class is a refreshing example of managing by working with people.”

William Rindfuss, executive director of strategic programs in the Haas Finance Group, calls Goodson “institutionally important” to the school. “Peter is a walking M&A history.”

Berkeley-Haas Dean Rich Lyons has introduced Goodson as “the master of tough love and real-world decision-making.” “What students soon realize is that he has a passion for their improvement. Somehow he seems to reach each student, every term, providing inspiration and an invaluable tool kit for their career advancement.”

Asking the right questions

Goodson’s tone, at times sharp, will quickly turn supportive. Highly animated, he gleefully fist-bumps students and peppers his lesson with anecdotes from his own experiences.

His lectures include references to “The Big Short” and other Hollywood movies that eviscerate Wall Street—and he pleads with students to challenge him. “He loves that level of engagement,” says Jen Fischer, MBA 16, who openly questioned a strategy Goodson suggested during the “Takeover Tussle” class.

Fischer (pictured) and another classmate, Zara Khan, MBA 16, decided at the start of the course that they would work together to challenge Goodson whenever they felt the urge. He worships push-back and often says “don’t come to class unless you have a solution or a decision viewpoint. We all read the case and don’t agree with me out of pity if I am wrong.”

Says Khan: “You don’t take Goodson’s class if you want to find answers. You take it if you want to learn how to identify and ask the right questions.”

The Oracle/Salesforce “Takeover Tussle” exercise was a case in point: on the topic of gathering information on what any other potential bidders might do and whether top Salesforce performers were likely to bolt after a takeover, Goodson was unequivocal: covert intelligence- gathering is a must, even if it means pushing the boundaries of what’s acceptable by hanging out at coffee shops near Salesforce or the headquarters of other potential bidders.

And so it went for three hours. Goodson made clear his disdain for today’s acquisition prices (“We live in a bubble.”), key players (“Sellers lie. Their advisers lie.”), and the buzzwords used to justify deals (“What does ‘synergy’ mean, anyway?”). Then he urged students to find value anomalies using judgment, leadership, operating improvement understanding, and creative negotiating skills to seek out deals where “you see potential others cannot envision.”

“Doing deals is easy, but it is a fool’s game,” he said. “Your job is to get to the truth.  Discover, if you can, how to strategically and operationally make a business you acquire substantially better and more valuable before you blow a fortune buying it.  Otherwise you are the definition of the ‘winner’s curse.'”